Coinbase Creates Index Fund for Cryptocurrencies

Many know about the Dow Jones, a stock market index showing how 30 publicly-owned U.S. companies have traded during a trading session in the stock market.

For cryptocurrencies, Coinbase announced on Tuesday that it is launching an index fund.

According to the announcement from one of the world’s largest cryptocurrency exchanges, Coinbase Index Fund “will give investors exposure to all digital assets listed on Coinbase exchange, GDAX, weighted by market capitalization.”

“If a new asset is listed on the exchange, it will be automatically added to the fund.”

Index Funds and Investing

Coinbase said index funds had changed the way how people think about investing.

“By providing diversified exposure to a broad range of assets, index funds enable investors to track the performance of an entire asset class, rather than having to select individual assets. We’re excited to give our customers the ability to invest in the potential of blockchain-based digital assets as a whole.”

For now, Coinbase said investing in the exchange’s index fund will be open to U.S. residents and accredited investors only.

Coinbase, however, assured that it is working on launching more index funds that would cater to all investors and cover more digital assets.

The index fund is already accepting applications, but Mashable said there is no indication when trading will start.

The index fund will impose an annual fee of two percent for managing assets and will accept U.S. dollars as well as cryptocurrency.

Coinbase Index

The cryptocurrency exchange company, meanwhile, said it is launching Coinbase Index (CBI).

Just like the Dow Jones, the index “is a measure of the financial performance of all assets listed on GDAX, weighted by their market capitalization.”

Coinbase said for those who want to see the current and historical levels for Coinbase Index can view it on the website while the construction and methodology can be read here.

A portion of the methodology said CBI is meant to be a “benchmark for the overall performance of its constituent assets.”

“The index level for CBI takes into account the latest price and supply of each of its constituent assets.”

Mashable said what makes Coinbase Index interesting is that “it measures market capitalization as price multiplied by total supply of coins that have been created since the first block on the asset’s blockchain.”

The site also said Coinbase is now among companies that run several cryptocurrency-monitoring funds.

“But Coinbase’s influence in the cryptocurrency space will probably bring a lot of exposure to its newly-launched index and fund, especially if the company keeps its promise of making the fund available to retail investors as well.”

Coinbase has been adding millions of users each month towards the end of last year, thus making it a major exchange in the virtual currency world, Mashable pointed out.

What’s Next?

Coinbase, one of the largest cryptocurrency exchanges in the world, is introducing an index fund and index for digital money.

What can you say about the endeavors? Share your thoughts by commenting below.